Failure to build resilience to crises can shave off 1-5% from annual global GDP growth: WEF

‘Companies and countries need to pivot rapidly from reactive risk management to strategic recovery so they are better prepared for the next crisis’

Failure to build resilience to crises emanating from climate change, COVID-19 and the war in Ukraine is estimated to cost annual global GDP growth by 1-5%, new research by the World Economic Forum (WEF) showed on Friday.

"Climate change, COVID-19 and war in Ukraine are world-shaping events accelerating crises from growing hunger, refugee flows and inequality to shocks in supply chains, energy prices and global growth. Companies and countries need to pivot rapidly from reactive risk management to strategic recovery so they are better prepared for the next crisis," the WEF said.

Findings of the research, released ahead of the WEF Annual Meeting 2022 in Davos, suggested that the "the cost of failure to build resilience to crises is between 1% and 5% of annual global GDP growth."

For example, workforce attrition during COVID-19 shaved 3.6% off growth in some countries while disruptions to energy and supply chains driven by current crises are wiping an estimated 1-2.5% off the global GDP.

Resilience comprises a set of strategic capabilities for achieving long-term, sustainable and inclusive growth, while a shared framework is a prerequisite for a coordinated, systematic approach to resilience.

"It would provide organisations with a common resilience language, structure and objectives, and guidance on how to protect and enhance sustainability and inclusiveness in an environment of more frequent crises and disruptions," the WEF said.

The United Nations, the WEF, McKinsey Global Institute, the International Monetary Fund and other leading organisations estimated that a significant share of annual GDP growth will depend on the degree to which organisations and societies develop resilience.